March 18, 2025

Abstract

How Can the World Bank Better Support Natural Disaster Risk Financing in Caribbean SIDS?

The Caribbean’s experience with Hurricane Beryl is a sobering reminder that the region not only faces significant exposure to various natural hazards, regularly grappling with strong hurricanes, extensive flooding, catastrophic earthquakes and prolonged droughts, but also that these natural hazard risks are rapidly changing in the face of climate shocks. Caribbean governments should be therefore looking ahead to ensure that they have access to more effective, affordable, pre-arranged financial protection solutions that better match the scale of existing and future disaster risks. This study discusses how the World Bank, as the largest provider of development finance to Caribbean SIDS, can better support the Caribbean’s recovery and resilience, especially through the provision of pre-arranged disaster risk financing tools which can provide emergency liquidity in the aftermath of a natural disaster to the most vulnerable and marginalized of Caribbean populations. We find that the World Bank needs to significantly improve the rollout of its Crisis Preparedness and Response Toolkit in the Caribbean region, and recommend that the World Bank undertake the following actions: (i) develop a Caribbean loss and damage data hub for all severities of natural hazards; (ii) use its tremendous convening power to promote greater uptake of catastrophe risk financing solutions among Caribbean SIDS; (iii) launch a substantial communications, outreach and training campaign to explain the nuances of its various crisis tools such as catastrophe (CAT) bonds and Catastrophe Deferred Drawdown Option (CAT DDO); (iv) partner with the Global Shield against Climate Risks to Strengthen CCRIF, the regional catastrophe risk insurance pool; and (v) apply its disaster risk financing framework to adaptative social protection (ASP) programs to better meet the needs of Caribbean populations that are disproportionately vulnerable to disasters caused by natural hazards.

Learn more